The Inflation-Output Nexus: Empirical Evidence from India, Brazil, and South Africa

Abstract

In this paper we study the relationship between output and inflation for India, Brazil, and South Africa using the EGARCH model. For India and South Africa, we find evidence for: (1) the Cukierman and Meltzer hypothesis that inflation volatility raises inflation; (2) the Friedman hypothesis that inflation raises inflation volatility; and (3) the Black hypothesis that output volatility raises output growth, and that output volatility reduces inflation. For Brazil, we do not find any evidence of a systematic relationship between inflation and output growth.

Keywords: Output; Inflation, EGARCH Model, Volatility

JEL Classification: C22, E31, E32